Air France-KLM reverses annual operating loss

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Air France-KLM’s revenue remained flat in 2013, but the airline group delivered an operating profit after a loss the previous year.

Turnover rose 0.4% to €25.5 billion ($35 billion), although the carrier says its sales were hit by negative exchange-rate effects. If adjusted for currency fluctuations, revenue grew 2.3%. The exchange-rate effects had a “marked negative impact” – ultimately worth €100 million – on the operating result, particularly in the second half of 2013, Air France-KLM says.

Earnings before interest, tax, depreciation and amortisation (EBITDA) rose a third to around €1.86 billion, and the group made an operating profit of €130 million. In 2012, it had suffered a €336 million operating loss.

The operating margin increased 1.8 percentage point increase to 0.5%.

However, net loss increased 49% to around €1.83 billion. That decline is due to a tax impairment worth €937 million and a €122 million loss associated with the ongoing sale of Air France’s regional subsidiary CityJet to German investor group Intro Aviation. The tax impairment “will not involve any cash-out, current or future, and has no impact on the group’s liquidity nor its solvency”, says Air France-KLM.

On adjusted basis, the net loss almost halved from €696 million in 2012 to €349 million last year.

Operating free cash flow was €538 million, compared with a negative cash flow of €47 million in 2012. The group says it had a “good” level of liquidity with cash reserves worth €4.2 billion at the end of 2013 and unused credit lines of €1.8 billion.

Capacity in the airline’s passenger business was increased 1.6%, and traffic rose 2.4%. The average load factor grew 0.6 percentage points to 83.8%.

Capacity in the long-haul segment – which represents around 80% of the group’s traffic and capacity – was increased 2.5%, and traffic grew 2.4%. Meanwhile, capacity in short-haul operations was cut 1.2%, but traffic rose 1.7%.

Total passenger revenue increased 0.7% to €20.1 billion, while the €260 million operating loss in 2012 was reversed into a €174 million profit.

In the cargo arena, revenue declined nearly 8% to €2.82 billion. The airline generated a €202 million operating loss, although this was €28 million lower than in 2012. Full-freighter capacity was cut 11.5% – nearly twice as much as planned at the beginning of 2013 – but total capacity decreased only 2.7% due to a “slight” increase in belly space, says the group.

Cargo traffic shrunk 4.6% and load factor declined 1.3 percentage points to 63.2%.

Net debt was reduced by €618 million to €5.35 billion. Air France-KLM aims to reduce its debts to €4.5 billion by 2015, through its “Transform” cost-cutting plan.

Chief executive Alexandre de Juniac says 2013 was an “important stage in the group’s turnaround” where its operations were “clearly benefitting from… new working conditions”. Despite a “persistently challenging [economic] environment”, the group generated a “robust free cash flow” and reduced debts beyond “initial targets”, he says.

Air France-KLM’s aims to generate EBITDA of €2.5 billion in the current year. De Juniac says he is confident the group will return to “profitable growth” this year.